Strategy and Competitive Advantages



We believe that our strategies will enable us to maintain our distinguished growth rate, thereby maximizing return on investment for our shareholders. Our principal strategies are the following:




Our IPO has as its main objective the strengthening of our capital structure, substantially reducing our indebtedness, as well as our financing risk, thus significantly reducing our cost of financing through the expect improvement of our debt rating. This virtuous cycle should allow us to lengthen the maturity profile of our debt by entering into new financing agreements with longer tenors. Improved access to attractive long-term funding will allow us to improve our results of operations and achieve greater economies of scale and, as a consequence, grow more quickly and profitably.




Similarly, the fleet outsourcing model enhances predictability in Seminovos at the end of the outsourcing cycle. Unlike rent a car industry, fleet outsourcing model guarantees a period equivalent to the contractual period (about 24 months) to plan the sales structure of such vehicles.

We believe that since the Brazilian fleet outsourcing market is highly fragmented, we can potentially become a market consolidator, building on our sustainable growth and economies of scale. We will seek to continue growing at a rate higher than the sector’s rate by: (i) extending our client portfolio, with a focus on companies in specific economic sectors, such as consumer and infrastructure, companies with over 100 employees and/or companies that still operate their own fleets, which we believe will allow us to operate with improved margins and, consequently, higher profitability; (ii) broadening our customer base, seeking to reduce the concentration of our top ten customers; (iii) increasing investment in our used vehicle sales segment, enabling us to more efficiently renew our fleet, reduce maintenance expenses as well as better serve our clients; (iv) continuing to invest in the improvement of our technology and management systems, helping us to monitor the performance of our lease agreements; and (v) expanding and diversifying our fleet, which will allow us to attract new target customers, meet the new demands of our current customers and open up new markets that we believe have significant growth potential.




The principal guiding forces of our business are to reduce our operational and administrative costs and to operate with a high degree of operational efficiency. We intend to take advantage of our low operational costs to offer highly competitive prices to our clients and increase our market share. In this connection, we plan to continue to develop our low-cost culture, seeking to sustain our profitable growth in the medium and long terms from the optimization of our corporate structure and improvement of our management systems. The Company has consistently improved its productivity, as measured, for example, the number of cars per employee which reached 41 in 2011, up 66% from 25 cars/employee two years earlier. In addition, our acquisition of a significant number of new vehicles has given us greater negotiating power of both pricing and terms with suppliers, thereby partially offsetting the effects of vehicle depreciation. We intend to benefit from increased economies of scale in the acquisition of new vehicles as we replace and enlarge our fleet. The ongoing fleet replacement cycle constitutes an important factor in the reduction of maintenance costs, which tend to be more elevated in older fleets.



We believe that our business model puts us in a unique position to take advantage of growth opportunities within the fleet outsourcing segment. We believe our principal competitive advantages are the following:




We focus exclusively on providing fleet outsourcing, which has a more predictable revenue cycle than the daily rental segment. Typical leases in the Brazilian fleet outsourcing segment are to corporate clients and have tenors of up to 60 months, with our average tenor of 32 months as of December 31, 2015). Longer-term lease agreements allow us to better anticipate our future revenue generation for the applicable periods, in contrast to revenue earned from daily or short-term leases in the case of the daily rental segment. The stability of our revenue is further reinforced through provisions in our fleet rental agreements that stipulate fines for early termination, in amounts up to 50% of the residual value of the agreement.

In a similar manner, our fleet outsourcing model provides predictability for our used vehicle sales at the end of the lease cycle. Because we focus on fleet outsourcing rather than the daily rental segment, we have more predictability over the period during which our vehicles are rented, which allows us to plan and structure the sale of used vehicles.

Finally, the fleet outsourcing sector is characterized by lower seasonality and greater stability in relation to the national macroeconomic environment compared to the daily rental segment, which is more sensitive to economic variations and national tourism patterns due to shorter-term contracts and dependence on individuals as clients. Fleet outsourcing delivers benefits to customers, such as optimized utilization of capital, cost reduction and enabling companies to focus on their core activities. As a result, this segment tends to grow with less dependence on external economic conditions.




Our founding shareholders have been active in the fleet outsourcing sector for 23 years, and, consequently, possess a detailed understanding of the market in which we operate and the needs of our current and potential customers, as well as proficiency in fleet planning and management and strong financial discipline in the pricing and administration of rental agreements. Furthermore, over nearly two decades, our management has developed, accumulated, processed and systemized these characteristics and procedures that, together with a long-term vision and talent to identify new opportunities, lead us to believe that we occupy a differentiated position from that of our competitors, as detailed below:

(i) Strong financial discipline in the pricing and administration of agreements: We have developed a vehicle-by-vehicle pricing methodology for our lease agreements, which allows us to administer these agreements profitably and assertively, as evidenced by our margins as well as our performance during periods of crisis, such as the global economic and financial crisis of 2008- 2009. Proper pricing is a skill derived from our knowledge of each market and client, appropriately considering location of the vehicles, type and amount of use, determination of a suitable vehicle model, ultimate resale value and risk of damage and theft losses. Our policy for pricing and approving our lease agreements is validated by our executives, with each cost being defined independently by specialists in their respective fields, including finance, administration, maintenance, used vehicle sales and purchasing.

(ii) Fleet planning and management capability: Our capacity in fleet planning and management is critical for our operational efficiency and is reflected in the high utilization rate of our fleet, which averaged 96% in the last three years, despite the growth in our total fleet during the same period.

(iii) Detailed knowledge of our markets and customers: Our history of relationships with corporate customers in various economic and geographic sectors has allowed us to accumulate a profound knowledge of their operations, which helps us to better respond to their needs and offer customized solutions. We have aggregated this knowledge from the detailed data base we maintain and continually update with respect to all of our customers. We have experience providing fleet outsourcing services in almost all business segments and regions in Brazil, offering economy models, light-commercial, luxury, bulletproof and four-wheel drive vehicles, as well as trucks.




Our low-cost culture, one of the pillars of our business model, combined with the scale of our operations, has allowed us to consistently increase our margins. Our management philosophy is clearly reflected in our strategic planning, which is focused on results, rigorous cost controls (zero-based budgeting), a streamlined organizational structure, and the development of employee talent and business ethics, which we, in turn, implement through modern management tools.

Another important factor that contributes to economies of scale and cost reduction is the large volume of vehicles we purchase, which strengthens our position and bargaining power when negotiating with principal vehicle suppliers and other providers. We believe we are one of the largest purchasers of new vehicles from Brazil’s top automakers such as Fiat, Volkswagen, General Motors and Ford, among others, which enables us to obtain favorable terms and significant discounts when acquiring vehicles for the expansion and renovation of our fleet, mitigating the effects of vehicle depreciation.




We operate in an integrated manner beginning with the purchase of new vehicles, through the leasing of our fleets and until the sale of our used vehicles at the end of our lease agreements. We rely on our central administration facility, 3 operational units and 13 operational offices that perform commercial and post-sales services, and sixteen used vehicle dealerships that serve wholesale and retail customers. We are strategically located in 14 states and the Brazilian Federal District, locations that represent 95% of the potential market for fleet outsourcing, according to the ABLA annual report, which provides us with greater service capacity and proximity to our clients. Additionally, we have a vast network ofaccredited service providers to support our needs and assist our customers, comprising more than 6 thousand accredited vehicle service facilities.

We continuously invest in the improvement of systems and controls, and since 2007, we have used an information technology system that allows us to manage our fleet on a day-to-day basis across all of Brazil. As of January 2010, we have also employed an enterprise resource planning software manufactured by SAP AG, or SAP ERP System, which makes our controls even more effective. We believe that our operation is adequately structured to meet the demands of our business and, as a result of our regional presence throughout Brazil, we believe that we are well prepared for expected future growth, with the ability to achieve this growth in a consistent manner, with low incremental operational and management costs, while maintaining our high level of operational efficiency.




We have a disciplined approach for the use of our capital and rely on a business model that seeks to maximize returns on invested capital. Our financial planning is based on the following guidelines: lengthening debt maturity, reducing leverage and optimizing our sources of revenue. We also price each of our lease agreements individually, in a manner that ensures competitive prices as well as profitability for our shareholders. Furthermore, our consistent generation of cash from operations coupled with a conservative financial management policy implemented over the course of the previous years is evidenced in part by the credit ratings agencies to our issuances of debentures.